Written by Gary
Opening Market Commentary For 06-23-2014
Premarkets were actually up (+0.05%) this morning in the absence of important US financial news. However the European financial news was all red, tainting the US markets in a negative way. Markets opened up but immediately fell into the red on low volume leaving some investors to believe the averages will turn around before the close today.
By 9:59 am volume had fallen to anemic levels, trading became spotty and market direction in doubt. Then US Existing Home Sales were reported at 10 am.
Markets did ease up off their opening lows when the US Markit Manufacturing PMI for June came in at 57.5, while expecting 56.0, but not enough to break into the plus side. When the US Existing Home Sales came in for May up 4.9% while expecting +1.9% shot the averages into the green confirming earlier investors thoughts.
The SP500 came within fractions of a point to set a new high but was stopped and returned to red levels. Where the markets are going today is elusive, but count on volatility.
The short term indicators are leaning towards the hold side at the opening. The all important signs of reversal, up or down, have not been observed so we are mostly, at best, neutral and conservatively holding. The important DMA's, volume and a host of other studies have not turned and that is not enough for me to start shorting. The SP500 MACD has turned flat, but remains above zero at 16.96. I would advise caution in taking any position during this volatile transition period although Barchart.com shows a 67 % buy. Investing.com members' sentiments are 60 % bearish and Investors Intelligence sets the breath at 68.5 % bullish with the status at Bear Correction.
Bottom line here is that I have not seen any serious bears jumping out of the woods just yet, although I am VERY concerned that ANY minor correction could turn nasty in a heart beat. One significant signal would be daily losses in any of the major averages that go over the 'magic' 3 % and then you need to pay close attention to risk-off tactics. There hasn't been a 10% correction in several years and some investors are becoming increasingly concerned an imminent correction is on the way.
In Lance Roberts article he asks, Is The Market Consolidating Or Topping?
There are two ways to look at stagnation in the markets. It is either a consolidation process that works off an overbought condition which leads to further advances, OR it is a topping process that leads to a market decline. Discerning which process is currently "in play" is critical for investor decision making.
Let me be clear. I am not stating that the current consolidation process will absolutely collapse into a sharp correction in the months ahead. However, I am stating that the current environment is more similar to past markets which did correct, than not.
While it is certainly possible that the markets could ratchet higher from here due to the "psychological momentum" that currently exists, the likelihood of a runaway bull market from here is remote.
It is still possible that Mr. Market is not through playing with the averages and even newer historical highs are a distinct possibility. Historically, accordingly to Eric Parnell, "major bull markets have almost never reached their final peak in a sideways grinding pattern. Instead, they have almost always peaked with flourish including one final crescendo toward a new all-time high before finally rolling over and succumbing to the forces of the new bear market".
The longer 6 month outlook is now 35-65 sell and will remain bearish until we can see what the effects are in the Fed's 'Tapering' game plan, Russia's annexing game playing and of course the World's newest player Iraq. I would also take chart and other technical indicators with a lessor degree of reliability for the time being and watch what the Janet Yellen's Fed does over the next couple of months. Also, the margin debt has been very high and as of Monday, 4-7-2014, it stood at $466 billion. (Read More at NYSE Statistics Archive) (It has since gone down slightly, but remains high.)
It is the final ending of QE that worries me the most as many financial institution and emerging markets can not continue to push forward or upwards without the Fed's 'Market Viagra'. Even if the Fed reduces its purchases by $10 billion every month for the rest of 2014, the Fed will have acquired $320 billion more for its portfolio. Note, that in 2013, the Fed added more than $1.0 trillion in securities to its portfolio. The debt stands at 4 trillion and will be at 5 trillion by the time the taper is completed and that is one hell of a debt that 'someone' has to pay.
Several additional notes of negativity where investors are worried about issues directly related to factors of the Argentine economy, South African Rand and Japan. And of course, China's defaulting businesses are dropping like flies. Now the Second Chinese Bond Company Defaults, First High Yield Bond Issuer and Another Chinese High Yield Bond Issuer Declares Bankruptcy. Iraq Anxiety Pushes Oil to Three-Month High is just another notch in the bears gun.
The markets are still susceptible to climbing on 'Bernankellen' vapor, use caution!
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The DOW at 10:15 is at 16921 down 25 or -0.15%.
The SP500 is at 1962 down 1 or -0.05%.
SPY is at 195.85 down 0.09 or -0.05%.
The $RUT is at 1188 down 0.12 or -0.01%.
NASDAQ is at 4365 down 3 or -0.08%.
NASDAQ 100 is at 3799 down 4 or -0.10%.
$VIX 'Fear Index' is at 11.20 up 0.35 or 3.23%. Neutral Movement
(Follow Real Time Market Averages at end of this article)
The longer trend is up, the past months trend is positive, the past 5 sessions have been positive and the current bias is mixed.
WTI oil is trading between 107.36 (resistance) and 106.16 (support) today. The session bias is negative and is currently trading down at 106.27.
Brent Crude is trading between 115.63 (resistance) and 113.87 (support) today. The session bias is negative and is currently trading up at 114.17.
Maybe I'm Wrong - Justifying $2,000+ Gold by Jeffrey Dow Jones
Gold fell from 1318.06 earlier to 1310.62, reversed direction and is currently trading up at 1316.00. The current intra-session trend is sideways and volatile.
Dr. Copper is at 3.141 rising from 3.107 earlier.
The US dollar is trading between 80.46 and 80.31 and is currently trading down at 80.42, the bias is currently sideways and volatile.
Real Time Market Numbers
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Written by Gary